Oslo, Norway, 28 June 2018 – Financial institutions must back companies that are removing unsustainable and illegal deforestation from their value chains or risk saddling themselves with unprofitable clients and stranded assets, a new report launched at the Oslo Tropical Forest Forum warns.

The Tropical Forest Alliance (TFA 2020), a partnership hosted by the World Economic Forum, says that banks, lenders and investors must support efforts by agriculture producers, traders and consumer-facing companies to end deforestation, a major cause of climate change.

Its new report, Roadmap to Financing Deforestation-Free Commodities, says that the economics of this industry is worth over $941 billion a year and could fundamentally change as businesses and governments ramp up their ambitions after the Paris Agreement on climate change.

Governments are deploying more stringent land-use regulations to end deforestation in countries such as Brazil and Indonesia. Businesses – particularly large consumer brands or those facing shareholder pressure – are also tightening policies in the supply chains of beef, soy, paper and pulp and palm oil, the four commodities that are behind half of all agricultural-driven land clearance and deforestation.

“These risks are largely unknown and unmanaged by financial institutions,” said Marco Albani, Director of the TFA 2020. “But they could radically change an unsustainable means of production through practices such as disclosure policies on deforestation in their investment portfolios, improved data gathering and monitoring techniques and improved environmental, social and governance structures.”

The TFA 2020, hosted by the World Economic Forum, is working with more than 60 global businesses – alongside over 80 governments, international organizations, civil society and non-governmental organizations – to support their efforts to stop deforestation in their supply chains.

The report examines:

· The business case for financial institutions – A look at the commercial effect that financing forest-risk commodities can have on financial institutions

· Robust policies and good practices – An exploration of how financial institutions can implement good-practice soft commodity policies and activity in their day-to-day operations, and how institutions manage policy non-compliance

· Monitoring – A discussion on the challenges of using certification for monitoring, how its use could evolve and the wider data required for monitoring

· A diverse market response – A look at how various entities in the soft-commodity value chain take different approaches to forest-risk commodities, and how they can be encouraged to work better together to ensure the mainstreaming of sustainable practices

The TFA 2020 is the global umbrella partnership that brings together governments, the private sector and civil society organizations to remove deforestation associated with the production of soft commodities. It is hosted by the World Economic Forum. More information is available at https://www.tfa2020.org/.

The report was shared at the Oslo Tropical Forest Forum (27-28 June 2018), a meeting which aims to advance strategies for mobilizing forests to help society achieve the ambitions of the Paris Agreement and the Sustainable Development Goals. More information is available at www.norad.no/osloforestforum.

Deforestation is a major driver of climate change. Emissions from tropical forest loss, including below-ground biomass and drainage of peat forests, added about 7.5 billion metric tons of carbon dioxide to the atmosphere in 2017, according to the World Resources Institute (WRI). That is nearly 50% more than the energy-related carbon emissions from the entire United States.

While destroying forests releases huge volumes of carbon dioxide, growing forests captures it from the atmosphere, making forest protection one of the keys to limiting climate change. Proper conservation and restoration of tropical forests, mangroves and peatlands could provide cost-effective in achieving up to 23% of the carbon dioxide reductions needed by 2030, according to a WRI working paper on climate and tropical forests released at the Oslo Tropical Forest Forum.

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